Leicester are looking to increase their firepower and the club have held a long-standing interest in Deeney.

Deeney, who signed a five-year contract last summer, is understood to be happy at Vicarage Road with the club dismissing Leicester's offer last week and Watford value the 27-year-old much higher than City's offer.

The Foxes, who won a shock title by 10 points last season, also had offers rejected for Deeney two years ago as they prepared for the Premier League after promotion.

But Leicester boss Claudio Ranieri is not trying to replace Jamie Vardy with Deeney with the former Walsall striker targeted to compliment last season's 24-goal top scorer.

Leicester are waiting on Vardy to decide whether he will join Arsenal after the Gunners activated his release clause.

The England striker, currently preparing for Euro 2016 with the Three Lions, is not expected to make a decision until after the tournament.

Press Association Sport understands they have made a counter offer to Vardy but have not matched Arsenal's deal.

Ranieri is looking for an additional goal threat having sold Andrej Kramaric, with Shinji Okazaki and Leonardo Ulloa scoring 11 league goals between them last season.

Deeney joined Watford from Walsall in 2010 in a deal which rose to £650,000 after their promotion to the Premier League in 2015.

The Saddlers would be due a significant chunk of the cash should Deeney leave after negotiating a sell-on clause when he left the Banks's Stadium six years ago.

He has scored 96 goals in 263 games for the Hornets, including five in his last five games of last season, as Watford finished 13th.